Its Time For Advisors To Address LTCs Place In A Financial Plan
It is estimated that today there are more than 45 million Americans aged 55 to 75. These individuals are living the nightmare of having to deal with long term care issues.
Dont they deserve professional advice to address how LTC will affect their family and finances? Dont they deserve to know the caregiving alternatives and the associated costs? Dont they need to understand the financing options for providing LTC?
So why have so many financial services professionals been reluctant to discuss LTC issues during the planning process? Because financial services professionals:
–Will not discuss LTC or any other issues unless they understand the impact it could have on the family and finances.
–Will not recommend LTC insurance as a possible solution unless they fully understand the product and its competition.
–Will not utilize LTC insurance as a planning tool unless they fully understand how to integrate it properly into an existing financial plan to maximize benefits and protection.
Lets address each of these issues:
The impact of LTC on family and finances.
When an individual is in need of caregiving, the other family members are affected. Why? Because families take care of families.
The impact on family members depends on what alternatives the family has in providing the care. In most cases, this care begins at home and unfortunately has a debilitating effect on those providing the care. It makes sense to discuss these issues before a family member may need care.
How important is it for a financial plan to include the effects of inflation? Most professionals would agree it is crucial to the solvency and legitimacy of any financial plan.
What is the real threat? Invading principal. Most retirees want to maintain their lifestyle, but under no circumstances do they want to invade their principal.
Yet I submit to you that omitting the LTC factor in such a plan can be much more threatening to the success of the plan than omitting the effects of inflation.
The old thinking is: You may live a long life and spend time in a nursing home.
The new thinking is: You will live a long life; therefore, you will need care.
With the present costs of LTC averaging $50,000 or more annually, how long can an individual afford this care without invading principal? The answer is found by including this discussion during the client planning process.
So, how does a financial services professional engage in a discussion of LTC with an existing client?
“I have advised you on how to invest your assets to provide an income for you during retirement years. But I have not discussed with you how to allocate assets to protect this plan when you need care.”
LTC insurance as a financial planning tool.
Until recently most LTC insurance products were viewed as being “nursing home insurance.” They also were viewed as overpriced and sold by high-pressure salesmen.
Today, the array of products and benefits are very comprehensive and are truly worthy of use as a financial planning tool.
It is the responsibility of the professional to search the market and establish a carrier relationship that provides not only quality products, but also training and sales support.
How to incorporate LTC insurance in an existing financial plan.
The table shows a practical way to illustrate the importance of LTC insurance.
Integrating LTC into an existing plan is no different than integrating life insurance. It requires an intelligent discussion on suitability, caregiving resources available to the family and financing options.
Keep this in mind: Life and most other forms of personal insurance protect your assets during your working years. LTC insurance protects your retirement assets during your retirement years.
Financial services professionals must continue to expand their knowledge into new disciplines that will serve their clientele in a professional manner. LTC planning is a discipline that is long overdue.
, CLU, ChFC, LLIF, CLTC, is national marketing manager for LTC insurance at the Corporation for Long Term Care Certification Inc., Lancaster, S.C. His e-mail address is: [email protected].
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 30, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.